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    June 2001


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    European Central Bank,2001

    Address Kaiserstrasse 29D-60311 Frankfurt am Main


    Postal address Postfach 16 03 19

    D-60066 Frankfurt am Main


    Telephone +49 69 1344 0


    Fax +49 69 1344 6000

    Telex 411 144 ecb d

    The country chapters in this Blue Book are published under the responsibility of the respective national central banks.

    All rights reserved.

    Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged.

    ISBN 92-9181-178-5

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    3ECB B lue Book J une 2001

    Foreword 5

    Introduction 7

    General terms and acronyms 8

    Chapters 1 Euro area 112 Belgium 553 Denmark 894 Germany 1235 Greece 1576 Spain 1837 France 221

    8 Ireland 2599 Italy 28910 Luxembourg 31311 Netherlands 33512 Austria 36713 Portugal 39514 Finland 42515 Sweden 45316 United Kingdom 479

    Annexes 1 Comparative tables 519

    2 Country tables 547

    3 Methodology for the statistical data 713

    4 Glossary 723

    In accordance with Community practice, countries are listed in the Blue Book using the alphabetical order ofthe national languages.

    In general, systems are described as of November 2000, although for some systems more recent informationhas been used. Data used in the Blue Book are as of end-1999 unless otherwise indicated.

    Conventions used in the statistical tables:- Not applicable or not available;. Not yet available; and... Nil or negligible.

    Country tables (1995-99):For the 11 Member States which adopted the euro on 1 January 1999, figures have been converted into eurousing the fixed conversion rates for all years, with the exception of Table 4 which is given in national currency.

    For the other Member States, figures are represented in national currency.

    Comparative tables (1998-99):Figures have been converted into euro for all countries using the exchange rate shown in Table 1 of therespective country tables.


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    ECB B lue Book J une 2001 5

    This report on Payment and securities

    settlement systems in the European Union is

    the third edition of what has come to be

    known as the Blue Book. The Blue Book

    dates back to September 1992 when the

    Committee of Governors of the Central Banks

    of the Member States of the European

    Economic Community published a descriptive

    guide to the payment systems of the then 12

    Member States of the European Community

    (EC). The second edition, which contained

    information on the 15 European Union (EU)

    Member States, was published by the European

    Monetary Institute (EMI) in April 1996. Thisthird edition contains revised texts and data for

    all 15 EU Member States, taking into account

    the fundamental changes which have taken

    place in the period from 1996 to 2000.

    In the institutional context, the most important

    changes were the establishment of the

    European Central Bank (ECB) and the

    European System of Central Banks (ESCB)

    in June 1998 and the introduction of the

    single currency the euro on 1 January 1999.

    Within the euro area (i.e. those countries

    which have adopted the single currency), the

    euro has replaced the legacy currencies in all

    central bank operations and in wholesale

    market activities.

    Payment and settlement systems have been

    growing in importance over the past two

    decades. The introduction of the euro has

    fostered the integration of these systems

    within the EU and, in particular, the euro area.

    This is a result of an escalation in both thevolume and the value of transactions stemming

    from money and foreign exchange markets and

    from financial markets in general.

    Within its currency area, the ECB, like any

    central bank, has a direct interest in the

    prudent design and management of the

    payment and settlement systems processing its

    currency. The smooth functioning of payment

    and settlement systems is a crucial aspect of

    a sound currency and is essential to theconduct of monetary policy. These systems

    also have a significant bearing on the

    functioning of financial markets. Moreover,

    reliable and efficient payment systems are

    crucial to the maintenance of banking and

    financial stability. In this context, great attention

    is paid to the smooth functioning of payment

    and settlement systems and instruments, as

    well as to reducing the potential risks

    associated therewith.

    In the light of the introduction of the euro and

    other developments which have triggered

    an advanced level of integration of EU payment

    systems, the need for a comprehensive

    description of payment and securities

    settlement systems in the European Union isof even greater importance today than it was

    previously. However, the Blue Book is not

    designed solely for the use of central banks.

    Other institutions which are involved either

    in discussing payment systems issues or in

    establishing or using payment systems

    infrastructures may also benefit from the

    information which it contains.

    Payment and settlement systems are not static

    in nature. They are dynamic systems which

    have evolved over time and which will continue

    to do so. Euro banknotes and coins will be

    introduced in January 2002 in the Member

    States which have adopted the euro. This will

    lead to even greater integration on account of

    increased demand from the public for faster,

    safer and cheaper services. It is thus expected

    that the integration of payment and settlement

    systems witnessed in the area of wholesale

    activities will rapidly spread to retail banking.

    I would like to thank all the EU central banksfor drafting their respective country chapters.

    Their contribution to and assistance in the

    preparation of this publication has been


    Frankfurt am Main, June 2001

    Willem F. Duisenberg



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    ECB B lue Book J une 2001 7

    The aim of the Blue Book is to provide

    a comprehensive description of the main

    payment and securities settlement systems in

    the Member States of the European Union

    (EU). These descriptions cover both the

    domestic and cross-border aspects of the

    systems. The range of schemes covered is not

    exhaustive and the selection is not intended to

    indicate their relative importance.

    For historical reasons and on account of

    differences in the legal, regulatory and

    institutional environment, the variety and

    structure of payment systems differ fromcountry to country. Similarities do, however,

    exist, and the introduction of the euro has

    triggered further harmonisation. For this

    reason the current edition of the Blue Book

    introduces a euro area chapter which describes

    aspects and features of payment and securities

    settlement systems which are common to, or

    are relevant to, the Eurosystem as a whole.This

    chapter also describes the common legal and

    regulatory framework, focusing, in particular, on

    the role of the European Central Bank and the

    Eurosystem. The country chapters deal with

    individual domestic features which are not

    common to the Eurosystem.

    In order to allow a direct comparison of the

    various payment systems, the euro area

    chapter and the 15 country chapters follow a

    commonly agreed outline. Each chapter is

    divided into four sections: the first section

    provides an overview of the institutional

    aspects which have an impact on payment

    systems and briefly describes the major partiesinvolved. The second section deals with the

    payment media used by non-banks and with

    recent developments in the area of retail

    payments. The third section focuses on

    interbank transfer and settlement systems.The

    fourth section describes the various securities

    settlement systems.

    This edition of the Blue Book, unlike the

    previous edition, contains a brief description of

    the role of the NCBs/ECB in the area of

    oversight.This reflects the growing importance

    which central banks are attaching to the sound

    and efficient functioning of payment systems.

    In addition, the third section of each country

    chapter has been expanded. There are two

    reasons for this. First, when the last edition of

    the Blue Book was published, most countries

    did not have an RTGS system, so this section

    included a description of the form which their

    respective RTGS system was going to take,whereas the current edition of the Blue Book

    describes RTGS systems which have been

    operational for at least two years.The second

    reason is that the section on retail payment

    systems has been expanded in order to

    include e-money and card-based schemes, thus

    reflecting the effect that advances in

    technology have had on payment systems.

    The fourth section, which deals with securities

    settlement systems, has also been expanded in

    order to include a description of the trading

    structures and the clearing houses in each

    country. This section therefore follows

    a security from when it is traded through to

    the settlement process.

    Each country chapter includes a list of

    abbreviations. At the end of the last country

    chapter, a glossary is presented.

    Finally, the annexes include an account of the

    methodology used for the statistical data,cross-border comparative tables and a set of

    statistical data for each country. The latter are

    presented as a time series in order to facilitate

    the analysis of recent developments.


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    BE BelgiumDK Denmark

    DE Germany

    GR Greece

    ES Spain

    FR France

    IE Ireland

    IT Italy

    LU Luxembourg

    NL Netherlands

    AT Austria

    PT Portugal

    FI Finland

    SE Sweden

    UK United Kingdom


    or EUR euro

    BEF Belgian franc

    DKK Danish krone

    DEM Deutsche Mark

    GRD drachma

    ESP pesetaFRF French franc

    IEP Irish pound

    ITL lira

    LUF Luxembourg franc

    NLG guilder

    ATS schilling

    PTE escudo

    FIM Finnish markka

    SEK Swedish krona

    GBP pound sterling

    USD US dollar


    ACH automated clearing house

    ATM automated teller machine

    BAS Business Administration System

    BIS Bank for International Settlements

    CAD Capital Adequacy Directive

    CBF Clearstream Banking Frankfurt

    CBL Clearstream Banking Luxembourg

    C.E.T. Central European Time

    CCB correspondent central bank

    CCBM correspondent central banking


    CCP central counterparty

    CDs certificates of deposit

    Cedel former Luxembourg-based European

    clearing house Centrale deLivraisons de Valeurs Mobilires

    CEPS common electronic purse


    CLFI Consolidated Law on Financial


    CLS continuous linked settlement

    CP commercial paper

    CPSS Committee on Payment and

    Settlement Systems

    CRD cash ratio deposit

    CSD central securities depository

    DVD delivery versus delivery

    DVP delivery versus payment

    EACH European Association of Central

    Counterparty Clearing Houses

    EAF Euro Access Frankfurt

    EBA Euro Banking Association

    EBP electronic bill presentment

    EBPP electronic bill presentment and


    ECB European Central Bank

    ECBS European Committee for Banking

    StandardsECN electronic communications network

    ECS Euro Clearing System

    ECSDA European Central Securities

    Depository Association

    edc European debit card

    EDI electronic data interchange

    EDIFACT Electronic Data Interchange for

    Administration, Commerce and


    EDP electronic data processing

    EEA European Economic AreaEFTPOS electronic funds transfer at point of


    ELMI electronic money institution

    EMI European Monetary Institute

    EMU Economic and Monetary Union

    EMV standard for integrated circuit cards

    established by Europay,MasterCard

    and Visa

    EPM ECB payment mechanism

    EPSS European Payment Systems Services SA

    ERP Euro Retail Payment

    ESCB European System of Central Banks

    ESCC European Securities Clearing


    EU European Union


    General terms and acronyms

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    Eurex European Exchange (common

    futures market of the German and

    Swiss stock exchanges)Euro 1 EU-wide payment system of the EBA

    Euro-giro European network for postal giro


    EuroMTS electronic bond trading platform for

    European benchmark bonds

    Euronext single stock exchange created by the

    merger between the Amsterdam,

    Brussels and Paris stock exchanges

    FAFO first available first out

    FESCO Forum of European Securities


    FESE Federation of European Securities


    FIFO first in first out

    FIN store and forward messaging service

    for financial institutions on the

    SWIFT network

    FIN Copy function of the SWIFT network

    whereby instructions may be copied

    and optionally authorised by a third

    party before being released to the


    FOP free of paymentFRA forward rate agreement

    GAAP US Generally Accepted Accounting


    GNP gross national product

    GSCC United States Government

    Securities Clearing Corporation

    GUI graphical user interface

    HCB home central bank

    IASC International Accounting Standards


    IBAN International Bank Account NumberICSD international central securities


    IGFs Investment Guarantee Funds

    IOSCO International Organization of

    Securities Commissions

    ISD Investment Services Directive

    ISFs Investment Services Firms

    ISIN International Securities Identification


    ISMA International Securities Markets


    IST Information Society Technologies


    LCH London Clearing House

    Matif French financial futures market

    March Terme International de


    MEFF Spanish Futures and Options Market(fixed income) Mercado Espaol

    de Futuros Financieros (renta fija)

    MoU Memorandum of Understanding

    MT100, SWIFT message formats for

    MT102, transferring payments


    NBRLs net bilateral receiver limits

    NCB national central bank

    Necigef the Dutch CSD

    NOREX common Nordic securities market

    Alliance created by the merger between the

    Stockholm,Copenhagen and

    Reykjavik stock exchanges

    NSLs net sender limits

    OTC over the counter

    PACE Purse Application for Cross-border

    use in Euro

    PIN personal identification number

    PKI public key infrastructure

    PNB Potential Net Balance

    PNS Paris Net Settlement system

    POS point of sale

    repo repurchase agreementRTGS real-time gross settlement

    SWIFT Society for Worldwide Interbank

    Financial Telecommunications

    SWIFT- store and forward messaging service

    NetFIN for financial institutions on the new

    SWIFTNet platform

    SET secure electronic transaction

    SFD Settlement Finality Directive

    Sicovam French CSD and clearing authority

    SA Socit Interprofessionelle pour la

    Compensation des ValeursMobilires SA

    SMEs small and medium-sized enterprises

    SMS Short Message Standard

    SOS Single Obligation Structure

    SSS securities settlement system

    STP straight-through processing

    TARGET Trans-European Automated Real-

    time Gross settlement Express

    Transfer system

    TfT Trade-for-Trade

    WAP Wireless Application Protocol

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    Euro area

    June 2001

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    12 ECB B lue Book J une 2001

    Euro area

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    ECB B lue Book J une 2001 13

    Euro area

    Introduction 15

    1 Institutional aspects 161.1 The general institutional background 161.2 The role of the Eurosystem 181.3 The role of other private and public sector bodies 23

    2 Payment media used by non-banks(aggregated euro area description) 262.1 Cash payments 262.2 Non-cash payments 272.3 Recent developments 28

    3 Interbank exchange and settlement systems 293.1 The real-time gross settlement system:TARGET 293.2 The Euro I system of the Euro Banking Association 343.3 Cross-border retail payment systems 373.4 Future developments 46

    4 Securities clearing and settlement systems 484.1 Trading 484.2 Clearing 494.3 Settlement 50


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    Euro area

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    ECB B lue Book J une 2001 15

    Euro area


    Payment and securities settlement systems in

    the EU were originally created with the aim of

    meeting domestic requirements. They were

    rather diverse in nature and not necessarily

    suited to the needs of a single currency area,

    where an infrastructure is needed which

    enables the quick and smooth flow of payments

    and securities at a low cost in the whole area.

    Against this background, the financial

    infrastructure in the EU has undergone rapid

    changes both in the run-up to and following

    the introduction of the euro. The launch of theeuro and developments in technology led to an

    overhaul and re-shaping of the infrastructure

    for effecting payments and for the trading,

    clearing and settlement of securities. In

    addition, the advent of the single currency has

    also accelerated efforts to harmonise and

    consolidate payment and securities settlement


    Some payment and securities settlement

    systems are common to, or relevant for, all the

    EU Member States which have adopted the

    euro as their single currency. The aim of the

    chapter on the euro area is to describe these

    systems and to depict the legal and regulatory

    environment in which they operate. Major

    emphasis has been placed on the role of the

    Eurosystem, which comprises the European

    Central Bank and the NCBs of the euro area.

    Last, but not least, the chapter on the euro

    area also endeavours to describe aspects and

    features of payment and securities settlement

    systems which are common to all EU MemberStates.The reason for this is that, with regard

    to the legal and banking environment in which

    payment and securities settlement systems

    operate, the EU Member States which have not

    yet adopted the euro share a great deal with

    those which have adopted the euro.

    The re-shaping of the infrastructure and

    accelerated efforts to harmonise and

    consolidate payment and securities settlement

    systems have been particularly prevalent inlarge-value payment systems. The creation of

    TARGET has established an EU-wide RTGS

    system which is used for the settlement of

    central bank operations, cross-border and

    domestic interbank transfers as well as other

    large-value euro payments. TARGET is an

    essential vehicle for the implementation of the

    monetary policy for the Eurosystem, and has

    helped to create a single money market within

    the euro area.

    The only privately owned and operated EU-

    wide payment system is the Euro 1 system of

    the Euro Banking Association (EBA). Euro 1

    processes interbank payments as well ascommercial payments.

    In addition to TARGET and the EBAs Euro 1,

    there are four large-value net settlement

    systems in operation: Euro Access Frankfurt

    (EAF) which is run by the Deutsche

    Bundesbank, Pankkien On-line Pikasiirrot ja Sekit-

    jrjestelm (POPS system) operating in Finland,

    Servicio de pagos interbancarios (SPI) in Spain

    and the Paris Net Settlement system (PNS) in

    France. More detailed information on these

    systems can be found in the relevant country


    With regard to correspondent banking, it has

    generally been noted that its former role of

    being one of the main ways of making cross-

    border payments has diminished in the euro

    area since the launch of the euro. There are

    signs that this development will also continue

    in future.

    The situation with regard to cross-borderretail payment systems within the euro area is

    not yet as developed as is the case for cross-

    border large-value payment systems. Despite

    the introduction of the euro, cross-border

    retail payment services have not yet reached

    the service levels of domestic retail payment

    services. Significant differences in quality,

    efficiency and price between domestic and

    cross-border services are still preventing

    people from reaping the benefits of the

    single currency. Correspondent bankingrelationships and enhanced correspondent

    banking relationships in the form of networks

    have experienced a remarkable concentration

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    Euro area

    of business in some major correspondent

    banks. In addition, large-value payment systems

    are also used for cross-border retail business.

    The only retail payment system which covers

    the whole of the euro area and which is open

    to all banks is the EBAs STEP 1 arrangement

    (see Section 3.3.3). In order to foster an

    improvement in the situation for cross-border

    retail payments, the Eurosystem published a

    report entitled Improving Cross-border Retail

    Payment Services the Eurosystems view in

    September 1999. This report identified the

    issues to be tackled and drew up a list of

    objectives to be fulfilled by the beginning of2002. A progress report was published in

    September 2000 describing the achievements

    which the banking community has made and

    highlighting areas where further work is


    In the area of securities, the introduction of the

    euro has eliminated currency segmentation,

    which was one of the main reasons for the

    fragmentation of listing, trading and settlement

    in the countries of the euro area.The increased

    homogeneity of the securities markets within

    the euro area has encouraged investors to

    regard the euro area securities markets as a

    single entity. Trading, clearing and settlement

    institutions are trying to respond to this

    change in the market by increasing their cross-

    border operations. Moreover, an integrated

    euro area-wide money market has emerged

    and the need in part to collateralise money

    market transactions has provided an incentive

    for the cross-border use of securities in the

    euro area. Another factor pushing in the same

    direction was the requirement for all collateral

    eligible for monetary policy operations of the

    central banks of the euro area to be equally

    usable by all monetary policy counterparties.

    As no suitable facilities for the cross-border

    transfer of securities existed at the beginning

    of Monetary Union, the central banks set up

    the correspondent central banking model(CCBM). In the CCBM, central banks act as

    correspondents for each other, thus enabling

    the cross-border transfer of securities used for

    the Eurosystems monetary policy operations

    and the intraday credit operations of the ESCB.

    In response to the increasing need for cross-

    border transfers in euro, including for

    commercial purposes, SSSs within the EU have

    provided facilities for the cross-border transfer

    of securities, i.e links between SSSs.

    In response to the demands of the securities

    markets for effective economies of scale and of

    scope, the securities settlement industry is also

    in the process of consolidating its cross-border

    activities. The consolidation process covers

    trading, clearing and settlement structures.

    1 Institutional aspects

    1.1 The general institutional


    Most of the provisions of the Treaty

    establishing the European Community (the

    Treaty) which relate to Monetary Union and

    most of the provisions of the Statute of the

    European System of Central Banks and of the

    European Central Bank (the Statute of the

    ESCB) apply only to EU Member States whichhave adopted the euro and/or their central

    banks and to the European Central Bank. In

    order to clarify which central banks are meant

    in which context, the name Eurosystem was

    coined at the beginning of Stage Three. The

    Eurosystem comprises the ECB and the NCBs

    of those EU Member States which have

    adopted the euro. The decision-making bodies

    of the Eurosystem are the Executive Board of

    the ECB and the Governing Council of the

    ECB.The NCBs of Denmark, Sweden and the

    United Kingdom, i.e. those EU Member States

    which are not yet participating in MonetaryUnion and continue to conduct an independent

    monetary policy, are not part of the

    Eurosystem. When reference is made to the

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    Euro area

    ECB and the central banks of all EU Member

    States, the more general term European

    System of Central Banks (ESCB) is used.The

    third decision-making body of the ECB, the

    General Council, comes into play when matters

    relating to the ESCB are involved.

    One of the basic tasks of the Eurosystem is to

    promote the smooth functioning of payment

    systems. The relevant provisions are enshrined

    in the Treaty and the Statute of the ESCB.The

    Statute of the ESCB is annexed to the Treaty as

    a Protocol and thus forms an integral part of

    the Treaty.

    The following legal provisions in the Treaty and

    the Statute of the ESCB are of particular

    importance with regard to payment and

    settlement systems:

    Article 105 (2) of the Treaty (reiterated

    in Article 3.1 of the Statute of the

    ESCB) which defines as a basic task of

    the Eurosystem the promotion of the

    smooth operation of payment systems;

    Article 22 of the Statute of the ESCB

    which states that the ECB and NCBs

    may provide facilities, and the ECB may

    make regulations, to ensure efficient and

    sound clearing and payment systems

    within the Community and with other

    countries. Such ECB regulations are

    directly applicable in the Member States

    which have adopted the euro.

    The Treaty assigns to the ECB the regulatorypowers to adopt any legal acts which are

    necessary to implement the basic tasks

    assigned to the Eurosystem. A distinction can

    be made between two different kinds of ECB

    legislation. First, there are legal acts addressed

    to third parties (other than the NCBs of the

    Eurosystem). These legal acts are ECB

    Regulations, Decisions, Recommendations and

    Opinions. Second, there are internal legal acts

    which take the form of ECB Guidelines, ECB

    Instructions and internal ECB Decisions.

    In addition, the EU Council and the European

    Parliament are empowered by the Treaty to

    adopt legal instruments. These legal

    instruments, which are applicable in all Member

    States, include rules relating to the banking

    industry and the provision of financial services.

    Thus they also affect the framework for

    payment and securities settlement systems.The

    main legal instruments used by the EU Council

    and the European Parliament are Directives,

    which have to be implemented at the national

    level. They are used to harmonise existing rules

    at the national level or to establish new

    legislation where national rules do not exist

    but are deemed necessary. Some of the main

    Directives which have an impact on paymentand securities settlement systems are the


    The Settlement Finality Directive

    The main objective of Directive 98/26/EC of

    19 May 1998 on settlement finality in payment

    and securities settlement systems is to (1)

    eliminate the main legal risks to which payment

    and securities settlement systems are exposed,

    taking into account the significant systemic risk

    inherent in such systems both net and gross;

    (2) ensure that the smooth functioning of a

    system cannot be compromised by the

    application of a foreign insolvency law in the

    event of the participation of a foreign entity;

    and (3) enhance the legal certainty of collateral

    (also to the benefit of the credit operations of

    the ESCB).The provisions of the SFD apply to

    (a) systems, (b) participants in systems, and (c)

    collateral security provided in connection with

    participation in a system or in the framework

    of the operations of the ESCB.

    The Cross-Border Credit Transfers Directive

    Directive 97/5/EC of 27 January 1997 on cross-

    border credit transfers is concerned with

    enabling individuals and businesses, especially

    small and medium-sized enterprises, to make

    credit transfers in euro rapidly, reliably and

    cheaply from one part of the Community to

    another. The Directive only applies to cross-

    border credit transfers up to a value of50,000. It lays down minimum requirements

    needed to ensure an adequate level of

    customer information both before and after

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    Euro area

    the execution of a cross-border credit transfer

    and it sets forth minimum execution

    requirements. In this respect, it provides that:

    customers be given, in advance, prices

    which they can understand clearly for

    any type of credit transfer;

    a transfer should be credited to the

    beneficiarys account within a clearly

    defined timescale (not exceeding 6


    transfers for which the originator pays

    all the costs (OUR mode) will be the

    rule, unless otherwise stipulated. Anintermediary or receiving bank may not

    make any further charges, in particular

    not to the beneficiary; and

    when a transfer goes astray, a money-

    back guarantee up to 12,500 is


    The Cross-Border Credit Transfers Directive

    assists the ECB in its task of promoting

    efficient cross-border payments in the third

    stage of EMU.

    The E-Money Directive

    Directive 2000/46/EC of 18 September 2000

    on the taking up, pursuit of and prudential

    supervision of the business of electronic

    money institutions is aimed at fostering the

    Single Market in financial services by

    introducing a minimum set of harmonised

    prudential rules for electronic money issuance

    and by applying the arrangements for the

    mutual recognition of home supervisionprovided for in Directive 2000/12/EC1 to

    electronic money institutions (ELMIs). This

    includes the safeguarding of the financial

    integrity and the operations of ELMIs by, on the

    one hand, ensuring the stability and soundness

    of ELMIs and, on the other hand, ensuring that

    the failure of any one individual ELMI does not

    result in loss of confidence in this new means

    of payment. The E-money Directive further

    creates a level playing-field for the issuance of

    electronic money by both traditional creditinstitutions and ELMIs, thus ensuring that all

    issuers of electronic money are subject to an

    appropriate form of prudential supervision.

    The amendment, introduced by Directive

    2000/28/EC of 18 September 2000, to the

    definition of credit institution in Article 1,

    paragraph 1, first subparagraph of Directive

    2000/12/EC of 20 March 2000 relating to the

    taking up and pursuit of the business of credit

    institutions, obliges institutions that do not

    intend to enter into the full range of banking

    operations to issue electronic money in

    accordance with the fundamental rules

    governing all credit institutions. Such an

    amendment promotes the harmonious

    development of the issuance of electronic

    money throughout the Community and avoidsany distortion of competition between

    electronic money issuers, including with regard

    to the application of monetary policy


    The Investment Services Directive

    Directive 93/22/EEC of 10 May 1993 on

    investment services in the securities field is

    also important in the context of payment and

    securities settlement systems as it abolishes

    (see Article 15) i) restrictions on access to

    regulated markets in EU Member States, and ii)

    restrictions on access to, and membership of,

    bodies performing clearing and settlement

    functions for regulated markets. The abolition

    of these restrictions on access benefits both

    investment firms and credit institutions (see

    Article 2.1).

    1.2 The role of the Eurosystem

    The smooth functioning of payment systems isof particular concern to central banks for three

    main reasons: i) a major malfunction in a

    payment system could undermine the stability

    of financial institutions and markets; ii) the

    soundness and efficiency of payment systems

    and the security of payment instruments affect

    the confidence of users and, ultimately, public

    confidence in the currency; iii) payment

    systems represent essential vehicles for the

    1 Directive 2000/12/EC of the European Parliament and of the

    Council of 20 March 2000 relating to the taking up andpursuit of the business of credit institutions (includes the former

    First Banking Co-ordination Directive and the Second Banking

    Co-ordination Directive, which were essential in achieving the

    Single Market for banking services in the EU).

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    Euro area

    implementation of monetary policy. The

    payment systems policies of central banks are

    aimed at ensuring the efficiency and soundness

    of payment systems. In order to achieve these

    policy objectives the payment and settlement

    services offered by the private sector are

    overseen by central banks (for further details

    on the oversight of payment systems see

    Section 1.2.1). Central banks also offer

    settlement services themselves and sometimes

    assume an operational role in payment

    systems. For the Eurosystem, this dual role of

    regulator (overseer) and service provider is

    emphasised, in particular, in Article 22 of theStatute of the ESCB.

    In addition, the Eurosystem acts as a catalyst

    for changes in the field of payment systems.

    Central banks payment systems function and

    prudential banking supervision share the

    objective of financial stability, i.e. they are both

    aimed at reducing the risk of financial crisis.

    However, while prudential supervision looks at

    institutions, central banks focus on the

    oversight of systems.The Eurosystem considers

    close co-operation between payment system

    overseers and banking supervisors essential.

    Therefore, EU payment systems overseers and

    banking supervisors have agreed on a

    Memorandum of Understanding (MoU). The

    MoU is aimed at promoting co-operation

    between payment systems overseers and

    banking supervisors in relation to large-value

    interbank fund transfer systems (IFTSs).

    With regard to securities clearing andsettlement systems, the Treaty contains no

    explicit reference to the role of the

    Eurosystem. Nevertheless, the interest of

    the Eurosystem goes beyond the

    limited perspective of a user of collateral

    in the context of its monetary policy

    and intraday credit operations. With its

    general responsibility for financial stability,

    the Eurosystem, like any central bank in the

    developed world, has a general interest in the

    smooth functioning of securities clearing andsettlement systems with a view to ensuring the

    smooth implementation of monetary policy

    and the smooth functioning of payment


    In pursuing the above-mentioned objectives,

    the Eurosystem also co-operates with other

    bodies and institutions which are active in the

    field of payment and securities settlement

    systems (see Section 1.2.4).

    1.2.1 Payment systems oversight

    As part of their payment systems function,

    central banks monitor developments in the

    field of payment and settlement systems in

    order to assess the nature and scale of the

    risks inherent in these and to ensure the

    transparency of the arrangements concerningpayment instruments and services. Where

    necessary they define principles and standards

    for the promotion of safe, sound and efficient

    payment and settlement systems. They ensure

    that the systems, whether these are operated

    by the central banks themselves or by private

    operators, comply with these principles and


    The oversight role of the Eurosystem which

    is recognised in the Treaty (Article 105 (2)) and

    the Statute of the ESCB (Articles 3 and 22)

    covers both large-value interbank funds

    transfer systems and retail payment systems.

    With regard to the systems managed by the

    Eurosystem, standards are applied which are at

    least equivalent to those applied to privately

    operated payment systems.

    The Eurosystem has clarified its payment

    systems oversight policy in a statement entitled

    Role of the Eurosystem in payment systems

    oversight which was published in June 2000.Accordingly, within the Eurosystem, oversight

    activities are performed in the following


    In line with the provisions of the Treaty and the

    Statute of the ESCB, the Governing Council of

    the ECB formulates the common policy stance

    by determining the objectives and setting the

    standards for payment systems whose

    functioning may affect the implementation of

    monetary policy, systemic stability, theestablishment of a level playing-field between

    market participants and cross-border payments

    within the EU and with other countries.

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    In areas not specifically covered by the

    common oversight policy, policies defined at

    the NCB level apply within the framework of

    the general common policy stance defined at

    the Eurosystem level, in relation to which the

    Governing Council can always take initiatives

    where necessary. An appropriate level of co-

    ordination between the ECB and the NCBs of

    the Eurosystem is ensured for any proposed

    policy or action in the field of oversight which

    an individual NCB may wish to pursue at the

    national level.

    The Eurosystem may also formulate a policyconcerning the security of payment

    instruments in order to maintain user

    confidence. An example of the latter is the

    Report on electronic money, published in

    August 1998.

    In line with the principle of decentralisation,

    implementation of the common oversight

    policy stance is ensured by the NCBs in

    relation to domestic payment systems. For

    systems which have no clear national base,

    the body entrusted with the oversight

    responsibility is the NCB of the country in

    which the system is legally incorporated, unless

    the Governing Council of the ECB decides

    otherwise on the basis of features of the

    system and entrusts oversight responsibility to

    the ECB. This is the case for the Euro System

    of the EBA Clearing Company (Euro 1) and for

    the Continuous Linked Settlement Bank

    (CLS Bank).2 In view of increasing cross-border

    participation in payment systems within

    the euro area, the Eurosystem favoursa co-operative approach towards the

    implementation of the oversight policy

    stance, with the local NCB acting as lead

    overseer, and being responsible for liasing with

    other relevant NCBs whenever this is required.

    The common oversight policy stance can also

    be legally ensured by ECB legislation in

    accordance with Article 22 of the Statute. So

    far, however, only more traditional, informal

    tools (e.g. moral suasion) are used. Whereapplicable, implementation can, however, also

    be enforced by legal instruments available to an


    The ECB and the NCBs of the Eurosystem

    ensure consistency in the implementation of

    the oversight policy stance and, in particular,

    that standards are applied in the same way for

    all the payment systems concerned. To this

    end, these oversight activities are co-ordinated

    at the level of the Eurosystem, through

    appropriate committees and working groups.

    As outlined above, the ECB or the NCB

    concerned will ensure the management of

    emergency situations in their capacity as

    overseers of the different systems. Appropriate

    information and co-ordination channels havebeen established within the Eurosystem to

    ensure timely communication between the


    In carrying out its oversight role the

    Eurosystem applies general principles,

    standards, requirements and objectives which

    are largely defined in the following reports:

    In 1993 the Committee of Governors of the

    Central Banks of the Member States of the EC

    endorsed the Report entitled Minimum

    common features for domestic payment

    systems, which contained the guiding

    principles for the preparation of payment

    systems for Monetary Union. The report

    underlined the importance of RTGS systems

    through which as many large-value payments as

    possible should be channelled in order to

    maximise the containment of systemic risk.

    Other large-value systems may continue to

    operate in parallel with RTGS systems if they

    fully comply with the minimum standards setout in the Report of the Committee on

    Interbank Netting Schemes of the central

    banks of the Group of Ten countries,

    published by the Bank for International

    Settlements (BIS) in November 1990

    (Lamfalussy report), and if they settle on the

    same day at a central bank. The 1993 report

    2 It should be noted in this respect that the ECB is the primary

    overseer for Euro 1, while the ECB is involved in the oversight

    of CLS as the overseer in respect of the settlement of the euro,

    in the framework of co-operative oversight set out in the

    Lamfalussy report. NCBs of participating countries areassociated with the oversight activity of the ECB as members of

    the Eurosystem the central bank of issue of the euro and

    as NCBs of the banks which act as settlement members of CLS


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    also elaborated on access criteria, specifying

    the requirements set out in the Lamfalussy

    report in this respect within the context of EU

    legislation.The common oversight policy of the

    Eurosystem for large-value interbank funds

    transfer systems (IFTSs) is based, in

    particular, on these principles. Moreover, in

    order to provide further guidance for the

    implementation of Lamfalussy standard 1, which

    requires all systems to have a well-founded

    legal basis under all relevant jurisdictions, the

    Eurosystem has developed harmonised terms

    of reference for legal opinions (i.e. a list of

    issues which have to be addressed in the legalopinion) for foreign participants in large-value

    payment systems.

    The guiding principles of the Eurosystems

    oversight policy in the field of electronic money

    are the requirements set out in the ECBs

    Report on electronic money (1998).

    In January 2001, the Governing Council of the

    ECB also adopted the G10 report on Core

    Principles for Systemically Important Payment

    Systems as one of the standards the

    Eurosystem must apply when performing its

    oversight role.

    The co-operation between payment systems

    overseers and banking supervisors contributes

    to an overall strategy of risk reduction in the

    financial system. Co-operation between these

    authorities is necessary since the stability of

    the financial system may be affected by the

    risks borne by credit institutions arising from

    their participation in payment systems or bytheir provision of settlement services. In early

    2001 the ECB, the NCBs of the Eurosystem

    and the NCBs of EU Member States which

    have not adopted the single currency, in their

    capacity as overseers of payment systems, and

    the EU banking supervisory authorities agreed

    to a Memorandum of Understanding to

    set out a framework for their co-

    operation. According to the Memorandum

    of Understanding, overseers will endeavour to

    ensure that supervisors are made aware of therisks credit institutions run through their

    participation in payment systems or by being

    the operator/settlement agent of a payment

    system. In turn, supervisors will endeavour to

    ensure that overseers are made aware of the

    risks posed to the system they are overseeing

    by the participation of a credit institution and,

    where the case arises, from the fact that the

    operator/settlement agent of a payment system

    is engaged in other banking activities, insofar as

    these may have implications for its settlement

    activities. Both authorities shall endeavour to

    ensure that either one of them is able to take

    prompt remedial action in the event of

    problems in a payment system which stem

    from, or have an impact on, a participating

    credit institution.

    As a rule, the oversight of retail payment

    systems will continue to be defined by the

    relevant NCBs. However, where new

    developments occur or where retail schemes

    would have potential cross-border implications,

    general policy lines are defined at the

    Eurosystem level. In this context, in September

    1999 the Eurosystem concluded that the

    situation for cross-border retail payments was

    unsatisfactory (see the report entitled

    Improving Cross-border Retail payment

    Services The Eurosystems view), in

    particular by comparison with domestic

    payments with regard to prices and execution

    times. Prices for cross-border transactions,

    particularly for cross-border credit transfers,

    are substantially higher than for domestic ones

    despite the introduction of the euro, and the

    execution time needed for cross-border

    transactions is substantially longer than for

    domestic ones. The low volumes by

    comparison with domestic business, the stillpredominant use of correspondent banking

    arrangements involving many intermediaries

    instead of using a single payment infrastructure

    as is the case domestically, and the lack of

    standardisation and automation at the

    interbank and intrabank levels were identified

    as some of the main reasons for these

    deficiencies. The Eurosystem, building on the

    experience gained in domestic environments,

    felt that a market-based, co-operative approach

    with banks was the most appropriate forachieving substantial progress. It set out

    seven objectives (such as a major price

    reduction for cross-border credit transfers)

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    and decided to act as a catalyst for change.

    The progress report, published in September

    2000, acknowledges that the banking

    community in the EU has made progress but

    observes that the objectives defined in the

    1999 report have clearly not yet been achieved.

    Therefore, the Eurosystem has defined further

    action points in order to ensure that

    substantial improvements can be achieved by

    2002. The Eurosystem will closely monitor the

    continued progress of the banks and their

    compliance with the objectives and action

    points set out in its reports and will continue

    to assist banks in achieving the common goalby playing the role of a catalyst for change.

    An assessment report on the level of cross-

    border retail services will be published in early

    2002. If banks fail to deliver efficient cross-

    border payment services by 2002, the

    Eurosystem would be forced to reconsider its

    policy of not becoming operationally active.

    1.2.2 Activities in the area of securities

    clearing and settlement systems

    According to the Treaty, the Eurosystems

    monetary policy and intraday credit operations

    should be collateralised. The Eurosystem

    therefore has a keen interest in ensuring that

    the transfer, settlement and custody of

    collateral is safe and efficient. In order to

    ensure a level playing field within the euro area,

    the Eurosystem has developed and endorsed

    nine standards to be met by EU SSSs used for

    ESCB credit operations.3 Individual SSSs have

    been assessed against these standards in order

    to qualify for use by the Eurosystem.The firstassessment was completed before the start of

    phase three and 29 SSSs qualified. The

    assessment is carried out on a regular basis in

    order to monitor major changes in individual

    SSSs. The Eurosystem also regularly assesses

    the links established by SSSs for the cross-

    border transfer of securities.

    1.2.3 Operational role of the Eurosystem

    One way for central banks to promote the safeand efficient functioning of payment systems is

    to operate their own payment systems. The

    main operational role of the Eurosystem lies in

    the provision of the TARGET system. However,

    TARGET is not run by the central banks of

    the Eurosystem alone. All central banks of

    the ESCB are connected to TARGET. TARGET

    is the real-time gross settlement system

    for the euro. It provides facilities for settlement

    in central bank money. A more detailed

    description of TARGET can be found in

    Section 3.1.

    The ECB and NCBs also offer their settlement

    services to other payment and settlement

    systems e.g. the balances of large-value net

    settlement systems are settled at the centralbank.

    Some NCBs also run retail payment systems

    and operate in-house SSSs. More detailed

    descriptions of the respective systems can be

    found in the relevant country chapters.

    The ESCB is also operationally involved in the

    cross-border transfer of securities which can

    be used as collateral to obtain intraday

    credit from NCBs and for monetary policy

    operations. For this purpose, the

    correspondent central banking model (CCBM)

    was established in order to facilitate the cross-

    border use of collateral in the Eurosystems

    monetary policy operations and the intraday

    credit operations of the ESCB. Within the

    CCBM the NCBs act as correspondents for

    each other and thereby enable counterparties

    to use all their eligible assets to obtain credit

    from their NCBs. Counterparties to the

    monetary policy operations of the Eurosystem

    and participants in TARGET in the EU area canonly obtain credit from the central bank of the

    country in which they are established their

    home central bank. However, through the

    CCBM, they can use collateral held in other

    countries. A more detailed description of the

    CCBM can be found in Section 4.3.1.

    1.2.4 Co-operation with other institutions

    In addition to defining principles, etc. on its

    own, the Eurosystem also actively co-operateswith other bodies and institutions which are

    3 Standards for the use of EU securities settlement systems,

    January 1998.

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    active in the area of payment and settlement


    First, there is the co-operation with the EU

    Commission, which regularly participates in

    meetings with the central banks on issues

    related to payment and securities settlement.

    In turn, the central banks participate in

    meetings at the EU Commission, thus ensuring

    that co-operation is as close as possible (see

    also Section 1.3.1 below).

    The ECB and several NCBs of the ESCB

    participate in the Committee on Payment andSettlement Systems (CPSS) of the G10 central

    banks. The CPSS operates under the auspices

    of the Bank for International Settlements (BIS)

    based in Basel.The CPSS monitors and analyses

    developments in payment and securities

    settlement systems. Its activities are generally

    more analytical than policy-oriented in nature.

    Nevertheless, its reports on many different

    issues have often had a strong influence

    on practical developments worldwide (for

    further information visit the BIS website at

    The ECB and several NCBs are participating in

    a joint task force of the CPSS and the International

    Organization of Securities Commissions

    (IOSCO) in the field of SSSs. The task force has

    already published a consultative draft report on

    Recommendations for Securities Settlement

    Systems aimed at developing recommendations

    for the design, operation and oversight of SSSs.

    The purpose of these recommendations is to

    reduce systemic risk, increase efficiency andprovide adequate safeguards for investors.

    The Eurosystem also co-operates closely with

    banking supervisors. Such co-operation and co-

    ordination contribute to achieving the overall

    objective of reducing risk in the financial

    system and help to promote stability.

    Furthermore, the Eurosystem actively

    promotes the further harmonisation of codes

    and operational standards which would enablethe straight-through processing (STP) of

    payments. This is crucial for achieving greater

    security and efficiency in payment and

    settlement systems.

    Last, but not least, the Eurosystem regularly

    meets with market participants in order to

    maintain close contact with the market, to

    convey its ideas to the market and to obtain

    feedback from market participants on how the

    work of the Eurosystem in the area of payment

    and securities settlement systems is perceived.

    1.3 The role of other private and

    public sector bodies

    1.3.1 The Commission of the European

    Communities, the Council of the

    European Union and the European


    The promotion of the smooth operation of

    payment systems is mentioned in the Treaty as

    one of the basic tasks of the Eurosystem.

    Nevertheless, the Commission of the European

    Communities (the Commission), in its function

    as the executive body of the EU, and the

    Council of the European Union (EU Council)

    and the European Parliament in their function

    as the legislative bodies of the EU continue to

    concern themselves with issues related to

    payment and securities settlement systems.

    One of the tasks of the Commission is to

    strive for further harmonisation of the laws

    within the Union, including those which have an

    impact on payment systems, by issuing

    Directives which have to be implemented in

    national law by the Member States. One of theprincipal aims is to create a single market with

    a level playing-field and equal opportunities

    throughout the EU. Consumer protection is

    another area in which the Commission is

    active. A recent example can be found in the

    field of cross-border retail payment systems,

    where the Cross-Border Credit Transfers

    Directive of the EU Council and the European

    Parliament (see Section 1.1) complements the

    initiatives of the Eurosystem and is pushing the

    industry to improve the situation quickly. TheCommission has also launched an initiative to

    explore how fraud and counterfeiting in

    payment systems can be prevented. Another

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    arrangements which are set up. As SWIFT is

    located in Belgium, the National Bank of

    Belgium acts as lead overseer and is supported

    in this task by the other G10 central banks,

    including the ECB. The practical co-ordination

    takes place in the Committee on Payment and

    Settlement Systems (CPSS), on which all G10

    central banks are represented. Recent developments

    In 1997 SWIFT announced plans for its next

    generation of products and services running

    on a secure internet protocol (IP) network.The first phase of this project was realised in

    1999 when the next generation concept,

    SWIFTNet, went into operation, offering add-

    on services such as real-time information.

    In July 1999 SWIFT published a white paper

    entitled Building for tomorrow, describing

    the new range of SWIFTNet services and

    related products, the phases of their

    introduction and the continuing role of the

    current network and services during the roll-

    out of the new environment.

    SWIFTNet services have been introduced with

    the objective of offering the financial industry a

    standard platform for financial communication

    and messaging and a package of interactive

    capabilities. SWIFTNet complements the FIN

    service in supporting real-time financial

    operations. The FIN services provided by

    SWIFT enable financial institutions in more

    than 190 countries to exchange financial data in

    a secure and reliable manner.

    Current SWIFTNet capabilities range from

    interactive query/response and transaction

    inputting to http-based browsing and file transfer.

    SWIFTs plan to allow access to FIN via

    SWIFTNet and to dismantle the existing X.25

    network infrastructure by the end of 2004 has

    been endorsed by its Board of Directors.

    SWIFTNet FIN will provide customers withsingle-window access to both SWIFTNet

    services and FIN. This will eliminate the

    necessity of managing two separate technical

    infrastructures in order to access SWIFT

    services, thereby reducing costs. Payments infrastructure

    SWIFT provides the interlinking messaging

    service for the 15 central banks participating in

    TARGET. In the EU, SWIFT also provides the

    messaging infrastructure for the Euro 1 system

    of the Euro Banking Association, ELLIPS

    (Belgium), DEBES (Denmark), BOF-RTGS

    (Finland),TBF/PNS (France), HERMES (Greece),

    IRIS (Ireland), LIPS (Luxembourg), SPI (Spain),

    RIX (Sweden), CHAPS Euro (United Kingdom)and remote access for EAF and ELS (Germany).

    In Italy, FIN has been used since November

    2000 to allow banks from abroad to access the

    BIREL system and to offer domestic banks an

    alternative for TARGET-related transactions.

    The Deutsche Bundesbank and CHAPS have

    also recently signed agreements with SWIFT

    and the Oesterreichische Nationalbank is in

    discussions with SWIFT regarding enhanced

    SWIFT facilities to access their payment system


    Looking at the situation outside the euro area,

    by the end of 1999 SWIFT was providing the

    network infrastructure for payments clearing

    systems in Australia (PDS), Canada (LVTS),

    Croatia (HSVP), Hungary (VIBER), New

    Zealand (SCP), Norway (NICS), Slovenia (SIPS),

    South Africa (SAMOS) and Venezuela (PIBC).

    Another 12 systems are currently under

    discussion or in the process of being


    The involvement of SWIFT in CLS, a single

    industry facility for reducing settlement risk in

    the foreign currency markets, is related to the

    provision of the network infrastructure.

    Four pilot banks have been using SWIFTNet

    InterAct, SWIFTs interactive communication

    service, which supports the exchange of

    request and response messages between two

    parties and allows users to browse remote

    data sources and to communicate with CLSServices in the testing phase of the CLS

    programme. The CLS network uses both

    SWIFTs current FIN messaging service and

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    accounted for 39% of transactions in terms of

    value, indicating the still high importance of this

    payment instrument for the economy. In

    Finland, on the other hand, the use of cheques

    was very marginal, representing just 0.2% of

    total non-cash transactions performed in 1999.

    Cheques also accounted for a smaller

    percentage of non-cash transactions than the

    euro area average in Belgium (6%), Germany

    (4%), Austria (2%) and the Netherlands (1%).

    2.2.2 Credit transfers

    Credit transfers are the most widely usedmeans of non-cash payment in the euro area. In

    1999 they accounted for close to half of all

    non-cash transactions in the euro area.

    Credit transfers are the preferred non-cash

    payment instrument in more than half of the

    euro area countries. In Finland they made up

    59% of all non-cash transactions in 1999, in

    Austria 58%, in Belgium 52%, in Germany 50%,

    in Italy 42% and in the Netherlands 41%.

    Estimates suggest that credit transfers are also

    the most commonly used non-cash payment

    instrument in Luxembourg. Only in Ireland

    (20%), Spain (14%), Portugal (6%) and France

    (18% in 1998) do consumers favour other

    payment instruments over credit transfers.

    2.2.3 Direct debits

    The importance of direct debits in the euro

    area has grown in recent years because of an

    increased tendency for utility and retail

    companies to offer this service. In 1999 directdebits accounted for about one-third of non-

    cash transactions in the euro area.

    The use of direct debits ranged from 4% of

    total non-cash transactions in Finland to 51% in

    Spain. Direct debits were the second most

    frequently used non-cash payment instrument

    in Germany (40%), Austria (29%) and the

    Netherlands (28.9%). In the other euro area

    countries direct debits played a significantly

    smaller role, with their share in total non-cashtransactions in 1999 ranging between 10% and


    Owing to their anonymous nature, there is no

    precise data on the value and number of cash

    payments conducted in the euro area. Taking as

    an indicator the amount of cash in circulation

    as a percentage of GDP in 1999, cash payments

    seemed to be in least demand in Finland (2.3%)

    and France (3.4%). The highest ratios were

    found in Spain (9.7%), Austria (6.7%), Germany

    (6.6%) and Italy (6.0%), indicating a higher use

    of cash for payments.However, any comparison

    is made difficult by the fact that for some of the

    legacy currencies there is a substantial though

    not precisely measurable amount of cash in

    circulation outside the country of origin.

    2.2 Non-cash payments

    Credit transfers are the most widely used

    means of non-cash payment in the euro area,

    followed by direct debits, as these means of

    payment offer the most convenience to their

    users. Also on the rise are card-based

    payments, with debit cards being preferred to

    credit cards in most countries.

    Although traditionally a very important

    payment instrument, in many countries of the

    euro area cheques have been replaced to a

    large extent by other payment instruments.

    Even in countries where the actual number of

    cheque payments is still rising (Ireland, Italy),

    their importance relative to other payment

    instruments is declining.

    2.2.1 Cheques

    In 1998, almost 70% of all cheques in the euroarea, or 4.8 billion, were used in France, while

    in the rest of the euro area approximately 2.1

    billion cheques were used. Following the trend

    of recent years, cheque use declined further in


    In Ireland and France, cheques are still the

    most widely used payment instrument,

    accounting for almost half of all non-cash

    transactions. Cheques were also quite popular

    in Portugal (34% of total non-cash transactionsin 1999) and Italy (28%). Although in Spain

    cheques made up only 11% of all non-cash

    transactions in terms of volume, they

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    2.2.4 Payment cards

    Though still outweighed in most euro area

    countries by credit transfers or direct debits,

    the use of credit and debit cards has increased

    throughout the euro area as a result of a

    growing acceptance of card-based payments by

    retailers. In 1999 about one-sixth of all non-

    cash transactions in the euro area were

    completed using some form of payment card.

    Debit cards are more widely held than credit

    cards in most countries of the euro area,

    outweighing the latter on average 4:1 in termsof the number of cards in circulation in 1999.

    Although there are more terminals which

    accept credit cards than debit cards in the euro

    area (more than 14,000 per 1,000,000

    inhabitants as compared with 9,274), debit

    cards are used on average almost four times as

    often as credit cards.

    Payment cards dominated non-cash payments

    in Portugal, where in 1999 some 47% of

    transactions were completed using credit or

    debit cards. They were the second most

    important payment instrument in Finland

    (37%), Belgium (29%), Spain (24%), Ireland

    (20%) and France (24% in 1998), and were just

    marginally outnumbered by direct debits in the

    Netherlands (28.6%). According to estimates,

    the use of credit and debit cards is also quite

    significant in Luxembourg. At the other end of

    the scale, a mere 5% of total non-cash

    transactions in Germany were conducted using

    credit or debit cards. In Italy (19%) and Austria

    (11%) payment cards were also relatively lessimportant than in the rest of the euro area. Credit cards

    The number of credit cards in circulation in the

    euro area reached 209 per 1,000 inhabitants in

    1999. They were used for an average of 5

    transactions per person per year.

    In 1999, the most cards per 1,000 inhabitants

    were found in Luxembourg (691), which at thesame time had the most credit card

    transactions per person per year (29.1). Also

    well above the euro area average in usage were

    Portugal (14.3 transactions per person per year

    and 258 cards per 1,000 inhabitants), Ireland

    (12.6 and 304) and Finland (11.6 and 575).

    Although in Spain there were 400 credit cards

    per 1,000 inhabitants in circulation, they were

    used rarely just 5.6 transactions per person

    per year. There was also less demand for credit

    cards in the other euro area countries, with

    cards in circulation ranging between 200 and

    300 per 1,000 inhabitants and usage below the

    euro area average. Trailing in the number of

    credit cards in circulation was France with a

    mere 20 cards per 1,000 inhabitants. Debit cards

    Debit cards are the most widely held kind of

    payment card in the euro area. There were 818

    debit cards per 1,000 inhabitants in circulation

    in the euro area in 1999, which were used for

    an average of 19.3 transactions per person per


    The leading country in the circulation of debit

    cards in 1999 was the Netherlands with 1,272

    cards per 1,000 inhabitants and 44.3

    transactions per person per year. Debit cards

    were also frequently used in Finland (51.1

    transactions per person per year and 647 cards

    per 1,000 inhabitants), France (48.6 and 552),

    Portugal (37.1 and 1,084), Belgium (34.7 and

    1,182) and Luxembourg (23.2 and 619).

    Despite a large number of debit cards in

    circulation, Germany (1,099 cards per 1,000

    inhabitants) and Spain (1,085) recorded only

    between 5 and 7 transactions per person per

    year, which was the same range of usageobserved in Austria (with 731 cards per 1,000

    inhabitants in circulation), Italy (351) and

    Ireland (154).

    2.3 Recent developments

    The most notable recent development in the

    usage of payment instruments by non-banks is

    the increased tendency for consumers to

    issue and transmit payment instructions

    electronically to their banks. Banks in the euroarea are actively taking advantage of recent

    advances in technology and are increasingly

    offering internet-based and mobile phone-

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    based banking to complement established

    forms of remote banking, like self-service

    banking, home banking and phone banking.

    Acceptance of those new media by consumers

    for payment purposes depends on the

    availability and cost structure of the underlying

    technology, which vary quite significantly

    between individual countries. Recent initiatives

    by the banking sector to standardise and

    simplify the use and enhance the security

    features of internet banking, electronic bill

    presentment and payment (EBPP) and e-money

    schemes (see 3.4) should facilitate this process.

    Although there has been a lot of discussion

    about the use of e-money and its importance, it

    is still not a widely used medium. In 1999 only

    0.3% of transactions were conducted using

    e-money, which nevertheless represents a

    doubling of the 1998 figure. A number of

    national e-money and prepaid card schemes

    are preparing or currently testing the

    adaptation of their cards for use in internet

    transactions, either through an online

    verification procedure or through a plug-in

    terminal for personal computers. Such an

    expansion in the features of those cards could

    eventually lead to a stronger demand from the

    consumer side, and growing familiarity with this

    means of payment could stimulate its use.

    While within any given euro area country the

    level of standardisation of retail payment

    instruments is high, there is a notable lack of

    standardisation across countries. Cross-border

    retail payments are often presented in formats

    unsuitable for efficient straight-through

    processing and therefore require costly manual

    intervention. The Eurosystem is currently

    engaged in efforts to facilitate the efficientprocessing of cross-border retail credit transfers

    within the euro area by, among other things,

    encouraging the banking sector to implement

    international standards, such as the

    International Bank Account Number (IBAN)

    and the International Payment Instruction (IPI).

    The banking sector is also engaged in efforts to

    create interoperability between card networks

    and direct debit schemes in different countries

    in order to enhance their cross-border

    usability (see Section 3.4).

    3 Interbank exchange and settlement systems

    3.1 The real-time gross settlement

    system: TARGET

    The Trans-European Automated Real-time

    Gross settlement Express Transfer (TARGET)system is the real-time gross settlement system

    for the euro. It is a decentralised system

    consisting of 15 national RTGS systems, the

    ECB payment mechanism (EPM) and the

    Interlinking system. The latter is a tele-

    communications network linking the national

    RTGS systems and the EPM. The system

    successfully commenced live operations on 4

    January 1999 with some 5,000 participants

    throughout the EU.

    The decision to construct the TARGET system

    was taken by the Council of the European

    Monetary Institute (EMI) in March 1995.

    TARGET was developed to meet three main

    objectives: first and foremost, to facilitate the

    integration of the euro money market in order

    to allow for the smooth implementation of the

    single monetary policy; second, to improve thesoundness and efficiency of payments in euro;

    and third, to provide a safe and reliable

    mechanism for the settlement of payments

    on an RTGS basis, thus contributing to a

    minimisation of risks in making payments. In

    order to achieve these objectives, TARGET

    offers the possibility of transferring central bank

    money on a cross-border basis as smoothly

    as in the domestic market, making it possible to

    re-use these funds several times a day.

    In order to minimise the time required and the

    costs to the central banks and credit

    institutions of establishing TARGET, it was

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    minimum common features with which each

    national RTGS system participating or

    connected to TARGET shall comply (e.g. access

    criteria, currency unit, pricing rules, time of

    operation, rules referring to what kind of

    payments may be processed through TARGET,

    when a payment order should be processed or

    when a payment order is considered to be

    irrevocable, and intraday credit); arrangements

    for cross-border payments through the

    Interlinking system; security strategy and

    security requirements for TARGET; provisions

    establishing the framework for the audit of

    TARGET; and the management of TARGET.

    An agreement has been entered into by the

    Eurosystem and the NCBs of the Member

    States which did not adopt the single currency

    on 1 January 1999. It provides a mechanism

    through which the NCBs of Member States

    outside the euro area are able to connect to

    TARGET and adhere to the rules and procedures

    referred to above. Some modifications and

    refinements have been made to these rules and

    procedures in order to take into account the

    special situation of the NCBs of Member States

    outside the euro area.

    3.1.2 Participation in the system

    According to the TARGET Guideline, only

    supervised credit institutions as defined in the

    first indent of Article 1 of the First Banking Co-

    ordination Directive4 which are established in

    the European Economic Area (EEA) can be

    admitted as direct participants in a national

    RTGS system. In addition, as an exception, thefollowing entities may also be admitted as

    participants in a national RTGS system subject

    to the approval of the relevant NCB:

    treasury departments of central or

    regional governments of Member States

    active in money markets;

    public sector bodies of Member States

    authorised to hold accounts for


    agreed to harmonise national RTGS systems

    only to the extent necessary to ensure both

    uniformity in the implementation of the

    monetary policy of the ECB and a level playing-

    field for credit institutions. Although several

    technical and organisational features continue

    to differ between NCBs,TARGET has been set

    up in such a way that the use of the system is

    very similar for participants, whether in

    domestic or in cross-border mode.

    A unique feature of TARGET is that its euro

    payment services are available throughout the

    EU, which is a wider area than that in whichthe single currency has been adopted. Indeed,

    three EU countries which have not yet adopted

    the euro (Denmark, Sweden and the United

    Kingdom) are connected to TARGET. Since it is

    necessary for all countries adopting the euro

    to participate in TARGET, and as the time that

    was available to set up the system was limited,

    all EU NCBs had to start investing money in

    TARGET before they knew whether they

    would be part of the euro area. Thus, in 1995,

    the EMI Council agreed that all current EU

    NCBs should be ready to connect to TARGET

    by 1999. It was pointed out, however, that for

    those countries which did not adopt the euro

    from the outset, the connection would be

    subject to certain conditions which were

    subsequently decided by the Governing

    Council of the ECB.

    3.1.1 Operating rules

    The rules governing TARGET and its operation

    can be found in the Guideline of the EuropeanCentral Bank on a Trans-European Automated

    Real-time Gross settlement Express Transfer

    system (TARGET Guideline) and the sets of

    rules and procedures contained in the national

    regulations and/or contractual provisions

    (national RTGS rules) applying to each of the

    national RTGS systems and the EPM which are

    the component parts of TARGET.The TARGET

    Guideline came into effect on 1 January 1999,

    i.e. the starting date of Stage Three of EMU.

    The TARGET Guideline applies to the ECB and

    the NCBs participating in the Eurosystem. It

    includes provisions on, inter alia, a number of

    4 This is now incorporated into Directive 2000/12/EC of the

    European Parliament and of the Council of 20 March 2000

    relating to the taking up and pursuit of the business of credit


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    investment firms established in the EEA

    which are authorised and supervised by

    a recognised competent authority; and

    organisations providing clearing or

    settlement services subject to oversight

    by a competent authority.

    The criteria for participation in a national

    RTGS system are set out in the RTGS rules

    concerned and are available to the

    interested parties. RTGS rules require

    reasoned legal opinions, based on the

    Eurosystems harmonised terms of reference

    for legal opinions, to be requested fromapplicants and reviewed by the relevant NCB.

    The harmonised terms of reference are

    available to interested parties. Capacity

    opinions (which establish that an applicant is

    legally able to conclude agreements) are

    requested for each individual (domestic and

    foreign) applicant when joining the system,

    unless such opinion has been received in

    another context. Country opinions (which

    establish that there are no foreign legal

    provisions which could have adverse effects on

    the agreements concluded) are requested from

    the jurisdictions of foreign participants,

    whether they are incorporated in an EEA or a

    non-EEA country.

    All credit institutions participating in national

    RTGS systems automatically have access to the

    cross-border TARGET service.

    It is also possible for credit institutions to

    access TARGET remotely. Remote access to

    settlement facilities in TARGET is defined asthe possibility for an institution, established in a

    country in the EEA, to become a direct

    participant in an RTGS system in TARGET in

    another country and, for that purpose, to have

    a settlement account in euro in its name with

    the central bank of that country without

    necessarily having established a branch or

    subsidiary in that country. Such credit

    institutions can only participate in TARGET on

    a positive balance basis as they do not have

    recourse to intraday credit or to the Euro-systems marginal lending facility.

    3.1.3 Types of transaction handled

    TARGET can be used for all credit transfers in

    euro. It processes both interbank and customer

    payments and there is no upper or lower limit

    placed on the value of payments. All payments

    are treated equally, irrespective of their value.

    The following types of transaction are handled

    by TARGET:

    payments directly connected with

    central bank operations in which the

    Eurosystem is involved either on the

    recipient or the sender side; the settlement operations of large-value

    netting systems operating in euro; and

    interbank and commercial payments in


    It is mandatory for the first two types of

    transaction to be settled through TARGET.

    TARGET is also used for the handling of

    transfers made between ESCB central banks.

    3.1.4 Operation of the transfer system

    In order to meet the needs of the financial

    markets in general and of its customers in

    particular, TARGET provides long daily

    operating hours: it opens at 7 a.m. and closes at

    6 p.m. ECB time (Central European Time). In

    order for participants to better manage their

    end-of-day liquidity, customer payments are

    subject to a cut-off time set at 5 p.m.

    Furthermore, common closing days apply to

    TARGET. From 2002 onwards,TARGET will beclosed not only on Saturdays and Sundays, but

    also on New Years Day, (Catholic/Protestant)

    Good Friday, (Catholic/Protestant) Easter

    Monday, Labour Day (1 May), Christmas Day

    and 26 December. In 2001, in addition to the

    aforementioned closing days,TARGET will also

    be closed on 31 December. TARGET closing

    days are, in effect, non-settlement days for the

    money market and the financial markets in

    euro, as well as for foreign exchange

    transactions involving the euro. The CCBM forthe cross-border use of collateral will be

    closed on TARGET closing days.

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    cross-border transfers should be in the same

    range so as not to affect the singleness of the

    money market. These fee structures are

    disclosed to interested parties.

    3.1.9 Statistical data for TARGET

    The turnover figures in TARGET have steadily

    increased since January 1999. In 2000, the daily

    average of payments processed by the system

    as a whole (i.e. both cross-border and

    domestic payments) was 188,157, representing

    a value of 1,033 billion.TARGET cross-border

    traffic amounted to 41.8% of the total TARGETvalue in 2000, compared with 38.9% in 1999,

    and to 21.2% of the total TARGET volume,

    compared with 17.6%. Of the cross-border

    TARGET payments, 96.5% in terms of value and

    65.5% in terms of volume were interbank

    transactions, with the remainder being

    customer payments. The average value of a

    cross-border interbank payment was 10.8

    million and the average value of a cross-border

    customer payment was 1.1 million. More

    detailed statistics can be found in the statistical

    tables in Annex 1.

    3.2 The Euro 1 system of the Euro

    Banking Association

    3.2.1 Institutional set-up

    The Euro Banking Association (EBA) is a co-

    operative undertaking between EU-based

    commercial banks and EU branches of non-EU

    banks. With Euro 1, it provides a multilateral

    large-value EU-wide payment system for eurocredit transfers.

    The system is governed by three bodies, which

    have been established under French law. First,

    there is the Euro Banking Association (EBA),

    which is an umbrella organisation which is

    intended to be a forum for exploring and

    debating all issues of interest to its members,

    in particular issues related to euro payments

    and the settlement of transactions in euro.

    Second, there is the EBA Clearing Company,which operates the Euro 1 system. It has its

    registered office in Paris and its shareholders

    are the clearing banks. The EBA Clearing

    Company was set up by the Euro Banking

    Association (EBA) and incorporated for the

    purpose of operating and managing the

    Euro 1 system. The EBA defines the general

    principles for the Clearing Company. Third,

    there is the EBA Administration Company,

    which was set up to provide administrative

    services, in particular human, technical and

    other support to the EBA and the Clearing

    Company. The relationship between the EBA,

    the EBA Clearing Company and the EBA

    Administration Company is governed by a

    master agreement.

    3.2.2 Participation and access criteria

    Euro 1 is an international system. As at 31

    December 2000 there were 72 clearing banks

    participating in Euro 1. These banks are from

    all the EU Member States and five non-EU

    countries (Australia, Japan, Norway, Switzerland

    and the United States), but all banks concerned

    are incorporated in the EU or have branches

    located in the EU. There are three sets of

    access criteria for Euro 1: legal, f